The Insurers

Congress Acts to Provide Coverage to Airlines

Published: September 22, 2001

(Page 2 of 2)

Before the attacks, such coverage had been included in the standard airline liability coverage of $1.5 billion that was carried for each aircraft. But such policies allow the insurers to cut back their coverage on seven days' notice.

The airlines, already struggling with falling passenger loads and plummeting stock prices, now face claims of as much as $20 billion from the attack at the World Trade Center alone; most of those claims will be from the families of the roughly 6,000 people who died on the ground.

They also face the possibility of further terrorism as the United States and its allies plan a counterattack.

Insurers have responded by abruptly limiting their coverage and sharply raising their rates.

The hijackings on Sept. 11, in which four planes were crashed, were the most costly disaster yet for airline insurers. The insurers are liable for up to $6 billion in claims.

"The terrible disaster we have just had wiped out more than one year's income for the entire global aviation insurance industry," said Mark Bayliss, a spokesman for the International Underwriting Association, an insurance industry group in London.

In setting rates, insurers said, they never contemplated the loss of four airliners in a single day. "Airplanes were used as missiles or weapons," Mr. Bayliss said.

Airline executives in Europe and the United States said that globally, their companies were facing added insurance bills of $2.2 billion, or an additional $1.25 a passenger. Singapore Airlines said yesterday it intended to add a surcharge of $1.25 to its air fares immediately. Qantas, the Australian carrier, said it would impose the same charge.

In Washington, officials said that the airlines would be required to buy the $50 million in liability coverage offered by the insurers but that claims for larger amounts than that would be covered by the government.

Congress's action would give the airlines and their insurers time to negotiate higher levels of coverage, as they plan to do in the coming weeks.

Insurance executives said the industry would probably offer at least another $50 million of coverage on top of the first $50 million, but at substantially higher rates.

Governments in Europe agreed to extend coverage to their airlines, but for a shorter term.

In Germany, after a day of frantic meetings between insurers, airlines and government officials, the transport ministry said it would accept liability of up to $20 billion for German airlines for the next four weeks.

In Amsterdam, KLM said it was negotiating with the Dutch authorities.

Scandinavian Airlines Systems, said it would ask the Swedish, Danish and Norwegian governments to provide cover of $1.7 billion for individual claims.

Michael O'Leary, chief executive of Ryanair , the maverick low-cost Irish airline, said in a telephone interview that the Irish government had given "an informal assurance" that it would cover the liabilities of Irish airlines, including Aer Lingus, enabling them to continue to fly.

Gordon Brown, the chancellor of the exchequer in Britain, said the government there had also agreed to provide four weeks of coverage.

These plans are to be discussed by European transportation ministers tomorrow, and Mr. Brown predicted broad backing. European officials denied that their measures represented state aid.